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Exclusive: Apple's rapid expansion moves tech behemoth to third city

By George AvalosOakland Tribune

Posted:
11/29/2012 08:50:54 AM PST

Updated:
11/29/2012 08:54:56 AM PST

SANTA CLARA -- Apple (AAPL) is planting its flag in Santa Clara in a big way for the first time as the technology giant continues its shopping spree for new offices, agreeing to occupy a site where Apple could locate 1,200 or more workers.

Cupertino-based Apple has struck a deal with developer Peery Arrillaga for a custom-tailored two-building campus that is under construction on the north side of Stevens Creek Boulevard in Santa Clara a short distance from the Cupertino city limits.

"It's great that Apple and other companies such as Google (GOOG) are expanding in Silicon Valley," said Reed Payne, manager of the commercial realty brokerage Kidder Mathews' Northern California offices.

Apple and Peery Arrillaga declined to discuss the development and leasing deal. However, multiple sources with direct knowledge of the transaction told this newspaper that Apple has leased nearly 296,000 square feet from Peery Arrillaga in a deal that included demolition of existing buildings.

The two new structures will both be six-story office buildings, said Ruth Shikada, Santa Clara's economic development officer.

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Apple, which has outgrown room for expansion in Cupertino, already has pushed into Sunnyvale with a string of leases totaling 1 million square feet where 5,000 people could work.

"What Apple is doing is one of the highest levels of expansion we have seen for any company," said Todd Shaffer, a senior vice president with the Santa Clara office of Cornish & Carey Commercial Newmark Knight Frank, a realty firm.

One of the big questions is whether the buildings Apple is leasing outside of Cupertino will be temporary workplaces for employees displaced while the company constructs its huge, circular-shaped "spaceship" headquarters in Cupertino.

Apple hopes to locate 14,000 employees at that site, up from estimates of 12,000 workers in June of last year. The headquarters, initially scheduled for completion in 2015, is now slated to open in mid-2016.

Apple had insisted on short-term leases in the three-to-five-year range at its various expansion sites in Sunnyvale, but now is signing 7-to-10-year leases, according to multiple people familiar with the deals. Those sources say the Peery Arrillaga project in Santa Clara is one of those longer-term leases.

The construction site of Apple's new campus on the west end of Stevens Creek Boulevard and Interstate 280 in Santa Clara on Nov. 27, 2012.
(LiPo Ching/Staff)

"This Santa Clara project is a build-to-suit for Apple. You don't go to that level of commitment unless you have a longer-term plan to occupy that building," Shaffer said.

The first building, now under construction, will be 188,000 square feet and is expected to be completed by mid-2014. Shikada said she didn't know when construction will begin on the second building, which will be about 108,000 square feet.

"Apple is doing well, which is whey have these aggressive expansion plans," said Tim Bajarin, principal analyst with Campbell-based market researcher Creative Strategies. "You cannot underestimate Apple's ability to achieve innovation. Their products are in demand. They continue to hire."

Contact George Avalos at 925-977-8477. Follow him at Twitter.com/george_avalos.